LEXINGTON, KY. (Dec. 29, 1997) -- Wednesday closes out our 1997 books and
it's turning out to be a surprisingly typical year for the High Yield Dow
Approach. Watching it day-to-day as I do for this column, the impression
is that 1997 was an extraordinary year for volatility and turmoil. Let's
look at some statistics from this year's results, with numbers through 12/23,
and see what the longer-term picture looks like.

The average return for the thirty stocks that were in the Dow Jones industrial
Average at the beginning of the year is 17.80%. (Four stocks were replaced
in March and, thus, are still included in our January 1997 results. The actual
DJIA index is up 19.62% for the year as a result of the replacement stocks'
fine performance.)

Sixteen of the thirty Dow stocks performed better than the 17.80% average
and fourteen trailed the average -- a pretty fair distribution. In terms
of the Dow Approaches, though, every single variation we track in the
Dow Area Statistics
Center beat the average. That's not unusual in that the Dow Approach
usually out-performs the overall index; otherwise, we wouldn't teach it here.

But what you may find surprising is that 40% of the High Yield Ten did not
keep pace with the average, yet the variations nevertheless Beat the Dow.
The four laggards have been International Paper(NYSE: IP), General
Motors(NYSE: GM), Minnesota Mining (NYSE: MMM), and Texaco(NYSE: TX).

If you're a Charles Dickens fan, how's this for A Tale of Two Cities?
The vaunted #2 stock on January 1 was AT&T(NYSE: T), which is
now the best-performing Dow stock for the year, up 53.36%. Just a matter
of days later, however, the #2 position was occupied by International Paper,
which soared and then flopped and is sitting on a paltry gain of 7.32% for
the year.

That kind of hit or miss with the PPP stock (O'Higgins's term for the #2
stock, the Penultimate Profit Prospect) is exactly why I think putting 40%
of one's portfolio in this position is too risky. Sure, if you doubled
AT&T, you're thrilled right now. But if you doubled International Paper
and skipped AT&T, your 1997 performance has been dreadful. There's always
a danger in trying to fine-tune any such strategy too closely. And if the
Dow Approach is your sole stock strategy, a 40% concentration in a single
stock is a real gamble.

All that aside, 1997 is turning out to be a very typical year, with the
high-yield stocks outperforming the larger index and posting gains near the
20% level. If you bought your stocks in January and pulled a Rip Van Winkle
until today, you'd see these numbers, smile serenely, and chalk up another
fine year. And that's really what this kind of strategy is all about.

Rankings note: Union Carbide(NYSE: UK) edged out Sears(NYSE: S) today as the final stock in the High Yield 10. As always, for complete
rankings, please visit our
Dow Statistics
Center, where the information for all thirty Dow stocks is updated daily.